Tesla Short Seller Warns of ‘Massive’ Supply-Chain Disruption

(Bloomberg) -- Short seller Fahmi Quadir, who’s betting against Tesla Inc., said the carmaker faces risks to its supply chain because some vendors haven’t been getting paid.

Quadir, the founder and chief investment officer of Safkhet Capital LP, made a name for herself by shorting the drugmaker formerly known as Valeant Pharmaceuticals around its peak in 2015. She said her firm sees some suppliers to Tesla filing for bankruptcy, which poses particular risk to the carmaker because many of its components are single-sourced.

“We question the ability for Tesla to actually deliver on their promises to their customers when they’re on the brink of potentially a massive supply-chain disruption,” Quadir said in an interview on Bloomberg Television. “We see very little contingency planning, and we also see executives from the supply chain department departing in recent weeks and months.’’

A Tesla spokesman declined to comment on Quadir’s remarks. The company has said previously that it regularly reviews whether suppliers are meeting all their obligations and that this can lead to payment delays. Tesla also downplayed the significance of it requesting more time to pay vendors by calling it a common industry practice.

Tesla shares were trading higher early Friday and dropped following Quadir’s comments. The stock fell as much as 3.7 percent to $254.06 as of 12:55 p.m. in New York. The stock is down about 18 percent this year.

Refund Requests

Quadir, 28, didn’t identify any suppliers or vendors by name. She wasn’t specific about who had recently left Tesla’s supply chain department though Bloomberg News reported last month that Liam O’Connor, vice president of global supply management, had resigned. The department is led by Sascha Zahnd, who’s vice president of global supply chain.

Tesla ended June with just $2.2 billion in cash. Its accounts payable -- a measure of short-term debts to creditors or suppliers -- was more than $3 billion. In a memo to suppliers in July, the company asked some suppliers to refund some payments to help it turn a profit.

The Wall Street Journal reported in August on an Original Equipment Suppliers Association survey of executives that found most respondents believed Tesla posed a financial risk to their companies. Some small suppliers claimed in the previous several months that they failed to get paid, the newspaper reported, citing public records.

Tesla said in August that it had strong partnerships with its suppliers and that more new companies were expressing interest in providing parts.

Disproving ‘Naysayers’

While Tesla has been burning cash and losing money for much of its time as a public company, Chief Executive Officer Elon Musk has said the carmaker is on the verge of earning money and generating cash as it ramps up production of its Model 3 sedan.

He told employees in an internal email earlier this month that they were “very close to achieving profitability and proving the naysayers wrong.”

Quadir said she initiated a small short position in Tesla stock in July. Her fund, which has raised about $30 million to date, is focused on identifying frauds or accounting vulnerabilities that could cause a stock to lose more than 60 percent of its market value.

--With assistance from Jonathan Ferro, Lisa Abramowicz and Dana Hull.

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, David Welch

©2018 Bloomberg L.P.